Exorbitant rents and a vacancy squeeze in Sydney and Melbourne are pricing out large national and global industrial users which are relocating to Brisbane.
Commercial factors driving the trend include rent differentials with the Sydney market, the availability of stock, a desire among companies to diversify their portfolio across the eastern seaboard and accessing Queensland’s rapidly growing population base in a tight labour market.
The result is that Brisbane has increasingly been seen as an institutional-grade market and part of a wider east coast industrial market.
JLL head of industrial logistics, Queensland Shaun Canniffe said research showed about 90 per cent of the major occupier moves tracked over the past year have been from national tenants and almost 50 per cent of those groups are new entrants in the Brisbane market.
“We’ve transacted over 85,000 sqm in seven separate deals so far this year, all of which are
national occupiers choosing Queensland as their growth market, with three of these groups
being new entrants into the Brisbane market,” he said.
“The increasing popularity of Brisbane with national and multinational companies has long
been a trend on the capital market side and investors have long viewed Brisbane as part of
a greater eastern seaboard institutional-grade industrial market.”
Large national and multinational companies are increasingly looking to Brisbane for warehousing and industrial space.
Brisbane has experienced very strong industrial rental growth, with prime net rents growing
by 15 per cent on average across different market precincts over the last 12 months.
However, Queensland still lagged the southern states, particularly Sydney, with Brisbane and Sydney rents going from a 16 per cent rise in the first quarter of 2022 to 31 per cent in 2023.
“The result is that despite strong recent growth in Brisbane rents, the gap between Brisbane and Sydney rents has significantly widened,” Mr Canniffe said.
“This price differential combined with the lack of available stock in the Sydney market has certainly caused many national occupiers to take a closer look at shifting more operations towards Brisbane.”
JLL senior director, research Australia Leigh Warner said Sydney and Melbourne’s industrial market have been performing strongly through the pandemic, with strong tailwinds from the shift towards online shopping and the reorganisation of supply chains.
“This strong demand has led to supply shortages and low levels of vacancy across both markets,” he said.
“These trends have increasingly flowed on to Brisbane over the past year, but certainly the tight availability of stock and limited opportunities in Sydney and Melbourne have benefited demand in Brisbane.”
Mr Warner said JLL’s data showed that gross take-up of industrial space by major occupiers in Sydney and Melbourne had slowed significantly in recent quarters due to the lack of options.
Brisbane, with a take-up of 777,248 sqm over the 12 months to the first quarter of 2023, had a greater take-up than Sydney with 553,050 sqm.